Tories: We will give Scotland powers to raise income tax

Cameron: believes greater independence could spark a Tory revival north of the border Getty

New plans for Scotland to set its own income tax and keep billions of pounds in VAT and other levies were unveiled today.

Under the Conservative proposals, Scottish MPs would get the freedom to increase welfare benefits, providing they cover the cost with higher taxes.

Scottish Tory leader Ruth Davidson said a new round of devolution on tax and spending would make the Edinburgh parliament “mature”.

But David Cameron also believes greater independence could spark a Tory revival north of the border, by allowing his party to offer Scots tax cuts in future elections. He believes elections there are currently too dominated by arguments over how to spend money, with less focus on saving it.

The proposals were unveiled by a commission set up by the PM to recommend ideas for further devolution if Scots vote No to independence in September’s referendum. It suggests that the tax-free personal allowance should stay the same all over the UK, but Scotland’s Parliament should be able to decide on rates and bands above that.

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All barriers that prevent Holyrood supplementing UK benefits out of its own budgets should be removed. And there is “a case” for Scotland keeping a share of VAT and taxes such as air passenger duty collected locally.

Ms Davidson denied it was a “consolation prize” for a No vote, or an attempt to rebrand the Conservatives. “After 15 years of devolution, it is now time for a mature Parliament that’s more accountable for the cash it spends,” she said.

“For the first time, MSPs will have to consider where the money they spend comes from — the hard-pressed Scottish taxpayer.” But there were calls for English regions such as London to be given similar powers. “If devolution is to be a principle not an expedient then it must apply to all nations of the Union,” said Labour MP Graham Allen.

Polls suggest the pro-independence campaign led by Alex Salmond has gathered support in recent months but that a “No” vote is more likely.

The Scottish Nationalists have claimed Scots could net an “independence bonus” of £1,000 a year if they vote Yes. That was dubbed “wishful thinking” by Treasury minister Danny Alexander.